
[Federal Register: November 26, 2008 (Volume 73, Number 229)]
[Notices]               
[Page 72097-72098]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26no08-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58977; File No. SR-OCC-2008-09]

 
Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Granting Approval of a Proposed Rule Change Relating to Eligible 
Margin Assets

November 19, 2008.

I. Introduction

    On May 15, 2008, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') proposed 
rule change SR-OCC-2008-09 pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal 
was published in the Federal Register on August 19, 2008.\2\ No comment 
letters were received. For the reasons discussed below, the Commission 
is approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 58347 (August 12, 2008), 
73 FR 48419.
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II. Description

    The primary purpose of this rule change is to eliminate, as 
eligible forms of margin assets, foreign currency and letters of credit 
denominated in a foreign currency.

Background

    The Philadelphia Stock Exchange, Inc. (``Phlx'') has delisted all 
physical delivery foreign currency and cross-rate foreign currency 
options (collectively, ``currency options'') and has advised OCC that 
it does not presently plan to list contracts requiring foreign currency 
delivery. To support premium and exercise settlement for such currency 
options, OCC has maintained in various countries bank accounts that 
also have been used from time to time to hold margin deposits in 
foreign currencies. With the delisting of physical delivery currency 
options, these accounts are no longer needed for operational reasons. 
Few clearing members have deposited foreign currencies as margin with 
OCC and only then in de minimis amounts, and no such deposits are 
currently held by OCC. In light of the limited and infrequent use of 
this margin asset class by clearing members, OCC has determined to 
close its foreign currency accounts for cost saving purposes. Closing 
these accounts means that OCC will no longer have the operational 
capability to accept foreign currency for margin purposes, and 
accordingly, OCC is modifying its rules to delete this asset class. 
Letters of credit denominated in a foreign currency have never been 
posted with OCC by clearing members, and their acceptance will be 
eliminated as well.

Rule Changes

    To eliminate these forms of margin assets, OCC is amending Rule 
604. Specifically, references to deposits of foreign currencies are 
being deleted from paragraph (a), which relates to cash margin 
deposits. References to letters of credit denominated in a foreign 
currency are being deleted from paragraph (c). Other technical, 
conforming changes will be made to paragraph (c) to reflect such 
deletion. Because amended paragraph (c) specifies that letters of 
credit are to be denominated in U.S. dollars, specific references to 
U.S. dollar denominated letters of credit are being removed from 
Interpretations and Policies .03 and .08 under Rule 604. Interpretation 
and Policy .09 is being deleted in its entirety as it solely relates to 
deposits of letters

[[Page 72098]]

of credit denominated in a foreign currency.
    For rule transparency purposes, OCC is also inserting a notice at 
the beginning of the By-Law articles and Rule chapters that relate to 
physical delivery currency options (i.e., Articles XV and XXI and 
Chapters XVI and XXII) to inform readers that such provisions are 
inoperative until further notice by OCC.

III. Discussion

    Section 17A(b)(3)(F) of the Act requires, among other things, that 
the rules of a clearing agency be designed to assure the safeguarding 
of securities and funds which are in its custody or control or for 
which it is responsible.\3\ The Commission finds the proposed rule 
change to be consistent with this requirement because it eliminates a 
margin asset class that was seldom used by clearing members for margin 
deposits. In addition, having foreign currencies on deposit is no 
longer required operationally for OCC to support premium and exercise 
settlement due to the delisting of all physical delivery currency 
options. Accordingly, the proposed rule should not affect OCC's 
obligation to assure the safeguarding of securities and funds which are 
in its custody or control or for which it is responsible.
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    \3\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 17A of the Act and the rules and regulations 
thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-OCC-2008-09) be and hereby 
is approved.\4\
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    \4\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-28044 Filed 11-25-08; 8:45 am]

BILLING CODE 8011-01-P
